Good morning, everyone, and welcome to Aker Solutions' presentation of the Q1 results for 2021. My name is Madeline Hagen, and I head up the Sustainability and Communication Functions. With me here today is our CEO, Kjetil Digre and our CFO, Edoard Eichgren. They will go through the main developments of the quarter. In addition, Mr.
Digre will give you an update of market outlook and the opportunities we see, including some insights in our offering to the offshore wind power market. We will also have time for some questions after the presentations. You may submit questions
Thank you, Mariana, and good morning, everyone. We are pleased with the development in the quarter. The main message is that Aker Solutions is on track on all key indicators. Firstly, our financial results are where they should be compared to our guiding for 2021. The revenue in the Q1 was SEK 6 point €5,000,000,000 with EBITDA of €427,000,000 Secondly, our order intake and backlog has increased, providing the foundation for the profitable growth we have guided for the coming years.
We have delivered an order intake of 9,400,000,000 That is a solid 1.5 book to bill ratio and that brings the order backlog up to 41,000,000,000 Thirdly, the strategic development of the company is also on track. Alliances and partnerships are important parts of our strategy And during the quarter we signed an MoU with DUSA and Babcock. Together we are already in dialogue with several customers regarding upcoming developments in the U. K. For sustainable energy and carbon reduction projects.
Prospects include both hydrogen production plants, CCUS facilities and optimization of climate footprint from other industrial installations. Now let me comment on operations in the period. Also in the Q1, COVID-nineteen has influenced our activities, But we have mitigated much of the effects through close collaboration with local health authorities and impressive dedication from our own employees. We are working closely with our customers to manage the pandemic while we progress with ongoing projects. And one of these was the subsidy systems for Johan Castberg, where we have delivered 5 standardized subsidiaries out of the order for more than 30 3 plus associated equipment and systems.
For the Arfuhl subsidy project for Aker BP, We have completed the manufacturing of subsidiaries on time and below budget. And for the Lingxue project offshore China, we have the deliveries of several umbilicals. At the same time, we have completed the EPC phase for the Johan Sverdrup Phase 2 jacket to Equinor and it's now ready for the installation phase. And in parallel, we also managed to keep the planned fast track progress for the HOT unmanned well led platform to Aker BP. Both the jacket and the topsides on this lightweight industrialized solution is on schedule for loadout this summer.
We are also moving forward with Nordea, Johan Castbail and the large new module for Phase 2 of Johan Seydrip. So now let's then review the key new orders. We have had several important wins this quarter, including energy transition projects. One of these is on the Empire Wind Feed contract. We have been involved in developing the concept and matured it further through pre FEED work for this prospect offshore New York for Equinor and BP.
The award of the FEED contract now into the Q1 shows that these key customers recognize that we have leading expertise for both offshore wind power and for solutions based on concrete technology. We also continue to reinforce our strong market position for decommissioning of old offshore installations from the Northeast Atlantic. In the new contract for Heimdall and Weschlofrik, platforms will be recycled at Aker Solutions decommissioning facility in Norway. The largest order intake in the quarter was in the E and M segment. The contract for electrification and modifications on existing Troll West platform illustrates how the energy transition and low carbon solution It's becoming a big part of all our segments.
Our experience from Troll West will also give us a strong position for similar contracts coming up. Another important award for EMM is the modification of the topsides on the Oskar B semi submersible production platform. In the Subsea segment, we also won important contracts. One example is the Elfisk field development, which will include 13 subsidiaries. This contract for the leading international operator, ConocoPhillips, is also yet another confirmation of the strong market position we have gained for our standardized tree design.
Also within Subsea, we received a new order from ENI for a total of 18 kilometers of steel tube umbilicals for Agogu Field Development Offshore Angola. I will then ask Idar to give some further insight into the Q1 financials before we look at market opportunities.
Thank you, Gittell, and good morning. I will now take you through the key financial highlights of All numbers mentioned are in Norwegian kroner, so let me start with the income statement. The first quarter Revenue was €6,500,000,000 versus €8,600,000,000 a year ago. This relates to the phasing of our project portfolio, where several large projects were finalized last year. At the same time, we are only in early phases of execution of our recent order intake.
We expect activity levels to ramp up In the second half of this year and into next year, as we continue to progress on our project portfolio, The underlying EBITDA was EUR 427,000,000 up from EUR163,000,000 a year ago. At the end of the quarter, we received a payment of SEK 698,000,000 from the North Sea Ost arbitration ruling. This had a positive effect on our EBITDA of €125,000,000 in the period. The underlying EBIT was €168,000,000 up from minus €185,000,000 a year ago. Net financial items in the period included a positive effect of SEK 147,000,000 from the arbitration ruling.
The income tax expense in the Q1 resulted in a high effective tax rate due to withholding tax in Angola and some other non deductible items. We ended the quarter with a net income excluding special items of €34,000,000 and earnings per share at NOK0.07. Now moving to our balance sheet and cash flow. We ended the Q1 with a strong cash flow Performance and financial position. Our working capital ended at minus EUR 118,000,000 And our cash flow from operation was EUR 482,000,000.
Cash inflow from investing was SEK168,000,000 and as I mentioned earlier, this included SEK 147,000,000 in interest income related to the arbitration ruling. Net interest bearing debt to EBITDA is robust at minus 0.8 times, well below our leverage covenant at 3.5 times. Our financial position was solid with a net cash position of €794,000,000 and a liquidity buffer of SEK 8,500,000,000 at the end of the quarter. Now over to the segments. For Renewables and Field Development, the first quarter revenue was SEK 2,800,000,000 down from SEK 3,100,000,000 a year ago.
The underlying EBITDA was €248,000,000 with a margin of 9%. This included the positive effect of the arbitration ruling. And as a reminder, the Q1 last year was negatively impacted by significant COVID-nineteen cost and provisions. The order intake was €2,600,000,000 or 1x book to bill, mainly driven by unannounced orders and additional scope in existing contracts. The activity level in this segment is expected to be somewhat lower in the second half of the year.
This is simply due to the phasing of our project portfolio where some projects are finalizing and Recent awards will still be in early phases of execution. This also go for the margins for this segment, where we typically book margins after 20% progress on each project. This segment is currently experienced high tendering activity and has important front end work ongoing, including positioning for large opportunities like Empire Wind and Norfolk Offshore Wind. For the EMM segment, the 1st quarter revenue was €1,900,000,000 down from €2,700,000,000 a year ago, driven by the finalization of large modification and hookup projects during last year. The underlying EBITDA was €76,000,000 with a margin of 4.1%.
Order intake was very strong at €4,100,000,000 or 2.2x book to bill. And our backlog is strong at SEK 19,000,000,000 The activity level in this segment is expected to increase slightly in the second half of the year on the back of ongoing projects and recent awards. In the Subsea segment, The first quarter revenue was SEK 1,900,000,000 down from SEK 2,900,000,000 a year ago. We expect activity level in Subsea to increase in second half of this year and into next year with progress ramping up on recently awarded projects. The underlying EBITDA was SEK 172,000,000 with a margin of 9%.
Order intake was strong at SEK 2,800,000,000 or 1.5 times book to bill, and the backlog is healthy and close to SEK 12,000,000,000 The Subsea segment has currently experienced high tendering activity, including some significant international feeds ongoing. So over to the order intake and backlog performance. The order intake was strong in the Q1 at SEK 9,400,000,000 or 1.5 times book to bill. This was a growth of 19% compared to last year and 39% compared to the 4th quarter. Our backlog increased to SEK 41,000,000,000 and therefore visibility moving forward has improved.
And as a reminder, our backlog excludes book and turn service work and potential growth in contracts. Now to sum up. In Q1, we delivered improved earnings, increased cash flow and increased order intake. We believe this demonstrates that we are on track with our strategic ambitions that we have set out. We also continue to deliver on our strategy of being a leading execution partner for both existing oil and gas markets and in emerging energy industries.
Our guidance for 2021 remains unchanged. Based on our current project portfolio, our ongoing FEED and tendering activity, we continue to see our from last year to around 5.5% to 6% level. The outlook for project sanctioning for the rest of the year and into next year remains positive. We have a strong position in active markets, both in the traditional oil and gas segments and related energy transition. This continues to put Aker Solutions in a good position to take full advantage of market opportunities ahead.
And with that, I hand it back to Kjetil.
Thank you, Idar. Let us then move to the outlook. We all see that the growing demand for energy and our customers in most of our key regions around the world are planning to sanction new and highly relevant projects. With our technologies, products, expertise, engineering capabilities and effective project execution, We are the solution to realize these plans. With our global setup, we are well positioned for this market development And we are carefully targeting many of the most interesting opportunities.
1 of the most active regions with many opportunities in the coming years is of course the Norwegian continental shelf. This is also a region where we have a particularly strong offering and capability to deliver execution of complete projects. As we have communicated in previous quarters, we expect to see the sanctioning of more than 30 new oil and gas developments. Almost all of these will include solutions for reduced environmental footprint. As you can see on the slide, the awards are already happening with Troll Electrification and Elvisk as the latest additions.
There are still many key projects on this list where we expect to see awards both this year and the next year. Several of these developments are large and many of them represent opportunities where we can demonstrate new solutions with global potential. We are actively positioning for these prospects and we are already involved in early phase work on many of them. Together with the market development in Norway, we also see that a number of new oil and gas projects are coming up in the international regions where we already have a solid presence. Last year, we announced our objective that within 2025, onethree of our total revenues will come from renewables and low carbon projects for oil and gas.
And within 2,030, This will count for 2 thirds of our total revenues. Now I'm pleased to say that we are on track also for this part of our strategy, and we progress with new steps quarter by quarter. About 35% of the first quarter order intake was related to energy transition business. And for new contracts, we are currently working on tenders with a total value of more than SEK78 1,000,000,000. And in the Q1, about 30% of the bids we are working on were related to energy transition projects.
Let me show some examples of how our activities for such new solutions have already progressed to key milestones. For Chevron's planned Jans project offshore Australia, we are well underway with the FEED we are delivering for a subsea compression system gas compression system. The concept is based on a copy of the subsea system we have previously delivered to the Oskar field. We have demonstrated that our world leading technology can contribute to significantly reduce CO2 emissions from the production. And this is increasingly relevant in new projects globally.
For the Norwegian longship project for the full scale carbon capture and storage, We are involved through the entire value chain. For the carbon capture facility at the cement factory in Brevik, we are executing the engineering handling facility. Also to Northern Lights, we have the EPC contract for the subsea systems that will enable injection of CO2 for storage deep down in the seabed. Wattenfell has announced that Aker Solutions in a consortium with Siemens is their 3rd bidder for development of the Norfolk Offshore Wind Power Zone in the North Sea. If Wattenfell starts the development of 1 of the world's largest offshore wind farms, Our scope will include deliveries of large HVDC converter platforms.
I've already mentioned the new contracts to decommissioning the decommissioned old offshore platforms from the Heimdal and Eschlofik fields. We have one of the industry's best facilities for decommissioning at Zuid. And we typically recycle or reuse more than 98% of the materials we receive. For steel materials alone, we typically recycle more than 15,000 tons in decommissioning every year. This represents a significant contribution the circular economy.
We have a solid position in this market and we expect to see an increase in the number of old installations coming up for the commissioning. For the Empire Wind project, where we just got a new contract, it is decided that most of the installations will be placed on concrete foundations standing on the seabed. Most countries planning offshore wind power developments are looking for solutions that can also contribute to high local content. And not all countries have yards that can take on project with large steel structure construction, but almost all countries have a construction industry and local access to concrete. With our documented position as the world's leading expert on advanced use of concrete for marine prospects, we are increasingly invited by customers to discuss how we can help them execute on their project plans.
For Arctic Offshore Farming. We have also in this Q1 progressed with our work to assemble 2 large offshore fish farming facilities, And we see opportunities for several fish farming projects coming up. In some regions, including in Norway, electrification of the energy supply on offshore oil and gas platforms is a large contribution to reach national targets for reducing emissions. Our new contract for electrification of Troll West for Equinor will further build our expertise and market position for upcoming similar projects. The Hywind Tampon for Equinor is currently the world's largest project for offshore wind power based on floating units.
Aker Solutions has the EPCI contract for delivery of the 11 holes. Since the award of the contract in 2019, we have completed engineering and the construction of the first 20 meters. Since the award and in the next phase we will continue slip forming until each of the cylindrical hulls have a height of impressive 107 meters. So with our growing activity for offshore wind power, We are also well placed for many of the projects that are now coming up. Our offering to the offshore wind power market builds on our already well established expertise and capabilities that we have proven in the oil and gas market.
We span front end, detail engineering, construction as well as installation, commissioning, operation and maintenance. Aker Solutions is one of very few contractors who can offer the customers complete EPCI deliveries for both fixed and floating solutions for wind turbines and both fixed and floating converter platforms. The same solutions can also be based on concrete substructures where we have a world leading technology. From our advanced manufacturing sites for Subsea, we can also deliver Subsea substations, cables and umbilicals for infrastructure to offshore wind farms. In terms of magnitude, We see that the converter platform will often be at the same scale as an oil and gas platform.
This means that some of the converter platforms can have a top side of 15,000 to 1,000 tons and a jacket substructure of 10,000 to 15,000 tons. Alternatively, the substructure may be a floating hole. For example, a semi submersible similar to proven solutions used for oil and gas fields. We anticipate that our scope for several upcoming offshore wind power projects and in particular for HVDC platforms will be comparable to projects we have executed many times for oil and gas. In my opinion, we have a unique position for delivering relevant and competitive solutions to our customers.
Now let's look at some numbers for opportunities we are pursuing. In the Q1, the tendering activity has further increased as already mentioned. Of the total bid pipeline, we have a good balance of bids between our regions and segments, And we are also basing our tenders on standardized products and solutions for projects where this is applicable. We have a selective tendering process with focus on projects where we can really make a difference and create value for our customers and make sound margins. Our customers are now moving to conclude key decisions related to new prospects, both for traditional and low carbon oil and gas developments as well as for renewables.
So let me sum up. We delivered a quarter with improved earnings, solid order intake and the robust backlog with an increasing share of energy transition business. We will move forward with top performance within HSSE and quality as this is both a key value for us and part of what makes us competitive. While we grow in new segments, we will maintain our already strong position within oil and gas. And the outlook for project sanctioning for 2021 2022 remains positive in our main markets, both in traditional oil and gas and related to energy transition.
And we are experiencing high demand for our front end capabilities. Many of the ongoing early phase studies are expected to lead to front end engineering and design work in the second half of this year. Looking ahead, While some near term restrictions related to COVID-nineteen pandemic remain, Aker Solutions sees increased market activity across all our segments. And the outlook for 2021 remains unchanged and we are on track with respect to all our targets. So with that, thank you for listening.
And now we can take a few questions.
Thank you, Kjetil, and thank you, Eda. We have a few questions, including an application for a job in engineering. 3 of the questions are on the same topic, on the margin guidance. So and they are from Eustan Wogen, Magnus Ulzvik and Hakon Amundsen. I'll read one of them.
Your margin guidance for 2021 includes the NOK €125,000,000 impact from North Sea Oost. Hence, it appears your underlying margin expectations are lowered slightly. Can you give some color on this? Has your expectation for the exit rate for 2021 changed?
Yes. I can give you a bit more insight into it. The SEK 125,000,000 from the arbitration is, of course, included, represent 0.5% in the margin. And we have maintained 5.5% to 6%. The underlying situation is unchanged.
This will probably put you more in the upper level of the range instead of the lower level of the range. And it's still early days of 2021, we will be happy to come back with further update at a later point in time.
Thank you. The second question is from Victoria McCulloch. And the question is, you mentioned a strong tender pipeline in your release today. Could you talk a bit more about the bidding environment, what you are seeing in terms of margins and bidding behavior?
First of all, as we've said throughout the presentation, we are we see that things are moving in the right direction with A lot of exciting opportunities both with our existing customers, key customers, but then also new ones. And then what we are experiencing really based on our own approach towards these opportunities is to make sure that we are in good control and understanding of the task. We are basing our offers on what we know, what we have of technology and where we can repeat our successes. And then obviously understanding the risk together with the client, making sure that that is priced in the best possible way and that we All in all then are getting on board in these 2 new opportunities with the SAAR margins that we have decided upon. I guess you also, Itar, can perhaps add a few words.
Yes. No, we have a very positive market outlook And in all the segments and whatever project we are looking at, we are aiming for healthy margins when we bid on project. And We are not buying work. We are entering into it with healthy margins.
Thank you. The next question is from Fredrik Lunde. Are you seeing inflation on input factors? With a net cash position, Is there any reason not to expect dividends for 2021?
I can probably start with the dividend part of it. As We announced last quarter, dividend policy will be reviewed and updated every year. And the next time will be in the at the end of the year. So stay in there and we will give you update at the end of the year.
Thank you.
And I think on the inflation part, if that is then due to the impact of the
impact of the impact of the impact of the impact of the impact of the
impact of the impact of the impact of the impact of the impact of the impact of the impact of the prices and the likes, I think It's our approach in sort of a responsible fashion and also together with our clients is actually to understand how this is moving. And when things are looking good and activity picks up, that is bound to be on the supply chain and some key factors. And we are then focusing on being there in well advance of understanding it And then freezing the input and also as I alluded to in my presentation, make sure that we have the right type of partnerships with the different suppliers entering into these tasks together with us so that we have this in a good control.
Thank you. And the next question is from Ole Petter Skolnald. Do you still have the cooperation with Nel in the hydrogen area?
Yes. Now we have agreed that that will come to an end and we are currently working on the this that we had together and closing them off in a good fashion. And then we are looking at other opportunities basing on our own competence and the opportunity pipeline that we see ahead of us.
And then the last question It's from Srepad Gandhi. And it reads, looking at the ever growing demand for renewable energy sector, Are we in the position today to say with the confidence that we have the right resources with the needed competency to take a leading position in this sector? Are there any resource development plans on those lines? Maybe any R and D efforts?
I think it's almost like saying yes to all those questions, but it needs some more details to it. Our belief, my belief is that The core of Aker Solutions and the broad offering, the long history and what we have developed out of methodology And a solid way of performing projects to our customers is our starting point. And then when entering into new markets, new customers and then also tackling new challenges. We obviously need to check with ourselves if we are relevant in the current version or if we have to change. And we're entering into renewables.
One of the biggest things that we are really investigating and are On track on actually solving is obviously to become an even more competitive version of ourselves in our yards, in the engineering organization and then delivering construction and commissioning towards our clients. So we are on that kind of journey. And in addition, we are working heavily on the digitalization of our methodology and also a digital design for our clients, which is also then clearly showing that we are relevant for all of new tasks.
Just to add to that one. In addition to what Kjetil mentioned, of course, a vital part of our strategy is also partnering up with other companies in order to have a complete and good offering in all of our segments, including Renewables. We have had interesting developments during the quarter in that regard.
Thank you, Kjetil. Thank you, Idar, and thank you all for joining us